Frequently Asked Questions
With homeownership being one of the biggest financial commitments most people make, understanding what really goes on during the mortgage process is essential for both first home buyers and seasoned homeowners alike.
A mortgage is essentially an agreement where a loan is secured by the borrower, typically for the home they wish to buy. This financial arrangement means that if the borrower is unable to keep up with the home loan repayments, the lender has the right to take ownership of the property.
Mortgage brokers like Kingbird Mortgages and Finance can help you get a wider range of lender and loan options, potentially better savings over the loan’s term, assistance throughout the loan application process, and expert advice on the different types of mortgage structures you can use.
Fixed-rate mortgages enable borrowers to lock in an interest rate for a specific term. This protects borrowers from fluctuations in interest rates for that term, offering peace of mind and facilitating easier budgeting and financial planning.
In contrast to fixed-rate mortgages, floating-rate mortgages have interest rates that fluctuate over time. A notable advantage of floating rate mortgages is the lower fees when making additional payments or paying off the mortgage earlier than scheduled.
Interest-only mortgages are tailored to minimise monthly financial commitments by only charging borrowers the interest of their home loan. This mortgage type can be particularly helpful during times of financial strain, such as during job loss or health emergencies.
Some borrowers may choose a split loan mortgage structure by having a portion of their loan on a fixed rate and another on a floating rate. This allows the borrower to benefit from both the stability of a fixed-rate mortgage as well as the flexibility of a floating-rate mortgage. If this loan option is something you are interested in exploring, Kingbird Mortgages and Finance can help.
Pre-approval is a confirmation from the lender to prove that you can borrow up to a certain amount of money for a home purchase. It’s essential to understand that pre-approval is not a guarantee of final loan approval.
The loan-to-value ratio (LTV) is a measurement of the ratio of a loan to the value of the property purchased.
For example:
- Property Value: $500,000
- Loan Amount: $400,000
- LVR: 80%
The debt-to-income ratio (DTI), expressed as a percentage, measures the proportion of your gross income that goes towards paying your debts each month. Keeping your DTI ratio low is recommended as it gives you a better chance of securing a loan with favourable terms.
Your home deposit can include a combination of savings, KiwiSaver withdrawals, or financial gifts from family members. A substantial deposit can lead to more favourable mortgage rates while lowering your overall loan balance.
These additional costs can include legal fees for reviewing your contracts, valuation fees to assess the property’s worth, various types of insurance like home and contents insurance, and the physical cost of moving. Budgeting for these costs is important to ensure you’re fully prepared.
A builder’s report assesses the property’s current structure and systems, laying out the condition and any existing or potential issues that could require maintenance in the future. Investing in a detailed builder’s report will give peace of mind to prospective homeowners or investors about their purchase, potentially saving thousands of dollars in unforeseen repairs.
A LIM report, sourced from the local council, compiles information concerning the property from various council records as of the date issued. This report often includes details on zoning, consents, permits, rates information, and known hazards or restrictions affecting the property.
In contrast to free online estimates, a formal valuation conducted by a Qualified Registered Valuer involves a thorough in-person assessment, offering a precise estimation grounded in current market conditions.
- Membership Duration: You need to have been in the KiwiSaver scheme for a minimum of three years.
- Age Requirement: You must be over 18 to withdraw funds for this purpose.
- First-time Withdrawal: You cannot have previously withdrawn from KiwiSaver to aid in buying a home or land.
- Owner-Occupier Intent: The property you’re acquiring must be intended as your principal place of residence, not an investment property.
- Location Limitation: The home or land should be located within New Zealand.
One of the primary incentives to refinance is to secure a lower interest rate, which can lead to significantly reduced monthly payments and less money paid in interest over the life of the loan, potentially saving thousands of dollars.
In New Zealand, credit scores range from 0 to 1,000. A higher score suggests to lenders that you’re a lower risk, potentially granting you better terms for mortgages. Most banks insist on a minimum credit score, often not lending to individuals with scores below a certain threshold. However, some non-bank lenders may be more flexible.
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The information on this website is provided for general information only and does not take into account your personal situation. You should consider whether theinformation is appropriate to your needs, and where appropriate, seek professional advice from nancial, legal and taxation advisers. Although every eort has beenmade to verify the accuracy of the information, Prospa, its ocers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded),for any error, inaccuracy, or omission from the information or any loss or damage suered by any person directly or indirectly through relying on this information.Eligibility and approval is subject to standard credit assessment and not all amounts, term lengths or rates will be available to all applicants. Fees, terms and conditionsapply. FSP663891. NZBN 9429046731678